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US Government Responds to Casino City Appea

18 July 2005

The U.S. Department of Justice filed its brief last week in response to Casino City's appeal of a district court's dismissal of its declaratory judgment case. The DOJ is attempting to attain the same ruling from the U.S. Court of Appeals for the Fifth Circuit that it did from the U.S. District Court for the Middle District of Louisiana: that Casino City lacks sufficient standing to bring this case before the court.

Intent to Engage in Prohibited Activity

Casino City is ultimately seeking a declaration as to whether it has the right under the First Amendment (Freedom of Speech) to advertise for online gambling services. For Casino City to prove that it does have standing to present the case, it must show that it either engages in or has an intention to engage in conduct that is prohibited by a statute or regulatory action. The regulatory actions that are being challenged are the DOJ's letters to advertisers, followed by a round of subpoenas, which warned advertisers that the advertising of online gambling services is tantamount to aiding and abetting an illegal activity and therefore a punishable offense.

Casino City is arguing in the circuit court that its advertisements "concern lawful activity"--the same argument that failed in the district court on the grounds that it Casino City did not engage in proscribed activities. The language of Casino City's appeal states, however, that its advertisements fall squarely in the category of advertisements that the DOJ has expressly stated "may be aiding and abetting illegal activities."

In an attempt to prove that Casino City lacks standing, the DOJ has again seized upon the fact that the company has not alleged that it engages in an illegal activity. The DOJ notes that as "master of his complaint," the plaintiff has the burden to allege facts that establish standing. The DOJ recognizes that "it is possible that some of [Casino City's] advertisers, which it describes as 'lawful overseas companies' may be violating federal law by accepting bets from person in the United States," but it claims that because Casino City has not alleged these facts, it has therefore not established standing.

A new element in the Casino City appeal that did not appear in the District Court proceedings is a myriad of case-law examples in which plaintiffs were objectively chilled from exercising free speech and were still found by the courts to have standing, despite their not having actually engaged in illegal activities in some of the cases. The DOJ's brief attempts to invalidate one of those cases by noting that the plaintiff of that case intended to continue activities that had resulted in criminal activities in the past, whereas Casino City intends to continue with activities that have not resulted in criminal charges.

The DOJ's overall approach to the issue of "intent to engage in prohibited activity" does not acknowledge a difference between the concepts of "statute" and "regulatory action." The DOJ would like a ruling that Casino City has no standing because the company does not admit to engaging in or intending to engage in an activity prohibited by statute, but this is not really at all what Casino City is challenging. Instead, Casino City is challenging the regulatory actions taken by the DOJ--the letters and subpoenas that created a chilled environment for the advertising of online gambling services. Casino City, therefore, does not allege that it engages in illegal activity, but instead alleges that it engages in activity that the DOJ stated it believes to be prohibited by statute.

Immediate Threat of Prosecution

The DOJ also agues that Casino City faces no immediate threat of prosecution. While Casino City has listed the DOJ letters to advertisers and its subpoenas to media and other companies as evidence of a credible threat of prosecution, the DOJ insists that neither of these things is suffice to constitute an imminent threat. The DOJ describes its letters to the National Association of Broadcasters and others as "only a general description of the federal statutes that apply to Internet gambling and advertisements promoting it," and states that "the letter's only reference to prosecution of anyone is the generic statement that 'we reserve the right to prosecute violators of the law.'" The brief also insists that because Casino City is not a member of the National Association of Broadcasters and because it was never targeted by either the letters or subpoenas that there has never been a reason to suggest that the DOJ had any plans to prosecute Casino City.

Many of the case-law examples introduced by Casino City in this latest round of proceedings deal with the "imminent threat of prosecution" issue, and the DOJ addresses them by explaining that they all involve an official statement directed to specific conduct engaged in by the plaintiff. The DOJ claims that its letters are different from the examples provided in those cases because the letters were not directed at Casino City's specific conduct, but were simply a general description of the statutes on the books.

The DOJ also points out that over a year had passed between the time it sent its letters and the time Casino City filed its complaint. Although Casino City demonstrates how the chilling effect of the letters and subpoenas caused several search engines to cease carrying advertisements for online gambling operations, the DOJ emphasizes that over the course of that year Casino City was never compelled to alter its advertising policies, meaning that it had not been chilled.

As proof that Casino City has indeed been chilled and also suffered as a result of the chill, the company provides in its appeal details of a deal to advertise on A & E 's History Channel that inevitably failed due to the network's concern over the DOJ's threats regarding online gambling. The DOJ claims that it is merely speculation that A & E canceled the agreement because of the DOJ's actions and doubts that the injury could be redressed by a favorable decision in the case at hand.

Relaxed Criteria

It is should be noted that one of the strengths of the Casino City appeal brief is how it built a case history of times that courts have loosened the standards for determining standing when it comes to declaratory judgment cases that involve a First Amendment challenge. The criteria for finding whether a case presents an "actual case or controversy" and whether the plaintiff risks "actual or imminent injuries" have traditionally been relaxed in such cases.

First Amendment

The DOJ has also developed several pages of arguments stressing why it does not believe Casino City has a case under the First Amendment. Chief among those arguments is that the Central Hudson Test--which governs claims for commercial free speech--does not even apply if the subject of the advertisements in question is an illegal activity.

In all likelihood, however, the circuit court will not rule on the merits of the case. It will instead issue a decision on whether Casino City has standing to present the case; if it does, the case will probably be sent back to the district court for a ruling on the merits.

What Happens Next?

Casino City has been given a deadline of July 27 to file a reply brief.

Click here to view the U.S. Department of Justice's Brief.

Click here to view Casino City's appeal.

US Government Responds to Casino City Appea is republished from iGamingNews.com.
Bradley Vallerius

Bradley P. Vallerius, JD manages For the Bettor Good, a comprehensive resource for information related to Internet gaming policy in the U.S. federal and state governments. For the Bettor Good provides official government documents, jurisdiction updates, policy analysis, and many other helpful research materials.

Bradley has been researching and writing about the business and law of internet gaming since 2003. His work has covered all aspects of the industry, including technology, finance, advertising, taxation, poker, betting exchanges, and laws and regulations around the world.

Bradley Vallerius Websites:

www.FortheBettorGood.com
Bradley Vallerius
Bradley P. Vallerius, JD manages For the Bettor Good, a comprehensive resource for information related to Internet gaming policy in the U.S. federal and state governments. For the Bettor Good provides official government documents, jurisdiction updates, policy analysis, and many other helpful research materials.

Bradley has been researching and writing about the business and law of internet gaming since 2003. His work has covered all aspects of the industry, including technology, finance, advertising, taxation, poker, betting exchanges, and laws and regulations around the world.

Bradley Vallerius Websites:

www.FortheBettorGood.com